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Which Tax Changes Can I Take Advantage of in 2005?

Thanks to the Economic Growth and Tax Relief Reconciliation Act of 2001, you can save more of what you earn. Brush up on these tax changes:

Income taxes drop
You can make more money, and pay less in taxes if you're in the top four brackets.

2005 2006
25% 25%
28% 28%
33% 33%
35% 35%

IRAs
Contribution limits to traditional and Roth IRAs are $4,000 in 2005 and 2006. In addition, if you're 50 or older, you're entitled to a $500 catch-up provision in 2005 ($1,000 in 2006), which bumps the contribution limits up to $4,500 in 2005 ($5,000 in 2006).

Age 2005 2006
Under 50 $4,000 $4,000
50 and over $4,500 $5,000

Retirement plans
Elective deferral limits to certain qualified retirement plans (401(k) and 403(b)) are $14,000 in 2005 and $15,000 in 2006. In addition, if you're 50 or older, you're entitled to a catch-up provision of $4,000, which bumps the contribution limits up to $18,000. In 2006, the catch-up provision is raised to $5,000, bumping the contribution limits up to $20,000. The table below shows the contribution limits for these plans.

Age Contribution Limit for 2005 Contribution Limit for 2006
Under 50 $14,000 $15,000
50 and over $18,000 $20,000

  • Did You Know...?
    You may be able to deduct job-searching expenses (such as printing, postage, and air fare) from your federal income tax, as a miscellaneous deduction, if those expenses exceed 2% of your adjusted gross income and if you're looking for a job in your same field. Other miscellaneous deductions (to help exceed the 2% AGI threshold) include tax preparation fees. See IRS Publication 529 for more at www.irs.gov.

This article is for informational purposes only. Neither New York Life nor its agents are in the business of offering tax, legal or accounting advice. Please consult your own professional advisors for tax, legal, and accounting advice.

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Which Tax Changes Can I Take Advantage of in 2005?

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